Hammer

Using a Hammer to break a Heart Crystal. Notice that this is no longer possible on v1.2 (as now objects are removed with a pickaxe).

Hammers are tools used to break down walls, create halftiles and can be used to reshape blocks.

The hammer is also used to destroy Walls that have been placed by the player. Naturally occurring walls, such as cave walls, are unaffected by hammers unless broken from the edges. This includes dirt wall, stone wall, ebonstone wall, pearlstone wall, molten wall, dungeon brick wall.Even if they are player placed, the walls must be broken from the edge of the walls.

As of the 1.2 update hammers may also be used to shape certain blocks, such as wood, stone, etc. into a more desirable appearance, as well as reshape blocks or change their appearance, like changing the height of Wood Platforms. Reshaping blocks will also allow them to produce waterfalls from any liquid in contact with them. (Eg: hitting a regular block once will turn it into a half block, then the next two will be slopes, then back to regular on the fourth hit).

The Breaker is the only hammer that can be used as a weapon on par with other weapons of its tier (does a big 24 damage and heavy knockback.)

Although low-tier hammers have futile damage, they can still be used to knock enemies away since they have good knockback.

Every hammer that has 80% or more hammer power are capable to destroy a Demon Altar in hardmode.

Bugs

If a sloped block is placed on top of a half block, and a Player stands on the very edge of the lower side of the sloped block, The player will appear to float one block higher. This has been confirmed on Multiplayer.